Hollande expressed an ardent belief of every ENA graduate (popularly known
as énarques, a popularity not often witnessed beyond the campus
gates.) Economics professors from Harvard, Princeton, and Oxbridge also dismiss
markets. They went so far as to claim all markets identify the right price
all the time, thus avoiding the need to understand them. Markets are there
to be used: a means to institute public policy. Such policies are imposed by
the ruling few.

The Bretton Woods gold standard constrained the ambitions of superior persons.
When President Nixon defaulted on the United States' gold payment obligation
in 1971, he opened the floodgates to Policy Making without Consequences.

In Debt and Delusion: Central Bank Follies That Threaten Economic
Disaster (1999), Peter Warburton wrote: "It is easy to forget that, as
recently as in the 1960s, the government budgets of the OECD countries were
in approximate balance and that net issues of debt were comparatively rare.
The outstanding stock of debt in public hands was a meager $800 billion at
the end of 1970....While Italy, Ireland, and Belgium were already experimenting
with deficit finance in 1970, the USA avoided its first budgetary lapse until
1975."

The developed world (OECD countries) recorded their last balanced budget in
1973, with 12 of the 18 countries in surplus. Rising oil prices was the primary
culprit for the 1973 blemish. Discovering markets were no longer constrained
by the gold fulcrum; politicians, government bureaucrats, and academic opportunists
conducted their social experiments with greater liberty. Previously, governments
could only spend so much before the markets said "enough." Coming to understand
their new dispensation slowly, then in a hurry, the technocrats found the costs
of their experiments on populations could be absorbed by the rising tide of
debt. Restraint in policy reformation, as in most every other human endeavor,
was fading in the western world.

Government debt has accumulated year-after-year, akin to regulations imposed
from Brussels and Washington. The comparison is not gratuitous. Impositions;
crony handouts; and abstract, social improvement programs that should have
been quarantined in the Ph.D graveyard; carry costs. According to the OECD,
the government net financial liabilities had risen to 52.2% of GDP in Germany
by 2010. In France, the figure was 58.9%; in Austria, 44.0%; in the Netherlands,
34.4%. Since budgets had been in balance, these numbers rose from approximately
zero in 1970.

The percentage of debt-to-GDP might be likened to a dependency ratio of the
bureaucracies. They have been more than willing to use the bond markets to
finance their indulgences, but now are turning against them. Other European
politicians and Brussels bureaucrats have also blustered about and interfered
in stock, bond and credit-default swap markets. (The U.S. énarques have
imposed their pricing model in every market, another terminally ill construct.)

Gideon Richman was skeptical of Hollande's resolve in the April 24, 2012, Financial
Times. Of Hollande's demand for French freedom from the markets: "Which
is all very well, unless you need to borrow billions from those vile markets
to meet your campaign promises, such as the creation of 60,000 new jobs for
teachers (a key constituency for the Socialist Party.)"

Presidential candidate François Hollande, as is true of Federal Reserve
Chairman Ben Bernanke, believes he can order nature around. Both have lived
inside the fishbowl their entire adult lives. Hollande was an ENA classmate
of Dominique de Villepin: poet, biographer of Napoleon, and former Prime Minister
of France; and of Ségoléne Royal, the losing Socialist candidate
(to Nicholas Sarkozy) in the 2007 presidential race. Hollande and Royal went
so far as to produce four children together as tribute to the class of '80.
Their allegiance was so fervent they never stopped to get married. (As happens
in the best of classes, they barely speak today.)

From the halls of the ENA to the Eccles building, it is inconceivable that
30 years - really a century or more - of social uplift, advancement, and progress
- is in the hands of the markets. We read: "Euro Crisis Back Again." Where
had it gone? The bad debt grows and can only be smothered by ever-larger quantities
of ECB loans, since commercial banks either will not or can not lend.

The énarques (the class as a type, not only the French) are
entirely responsible. They imposed the ECB and euro by preventing referendums
in most European countries. They instituted the policies from which it is now
impossible to retreat. This is true in the United States, too.

All channels of the European banking system now flow through the ECB. Jim
Bianco (Bianco
Research) told me it is not possible for the ECB to reduce its control
of the plumbing. The ECB cannot back away from its pivotal, interbank lending
position, since it would be immediately apparent which banks were trouble banks
- better banks would only lend to worse banks (if at all) by charging a higher
rate of interest. A run on the bad banks would follow. The banks and official
channels cannot announce phony rates, because of the legal trouble banks now
face from charges that they fixed LIBOR rates.

Bernard Connolly, the economist who foresaw the End before the Beginning:
that is, before the ECB was founded, wrote in the The Rotten Heart of Europe:
The Dirty War for Europe's Money (1995):

"As we have seen, German monetary leadership in Europe has been simultaneously
embraced in France, if only by the Vichy tendency in the French elite, as necessary
expiation for past sins (suffering being inflicted on ordinary people, who
do not matter, not on the elite themselves) and bitterly resented. By hamstringing
the ability of the French governments to act on behalf of the French people
- or, to put it more realistically, by giving them an excuse for not so acting
- that embrace has destroyed political legitimacy in France. It has contributed
to a contempt for democratic politics so profound, among both rulers and ruled,
that the survival of the Fifth Republic may be brought into doubt in the next
few years, 'Europe' or no 'Europe.'"

Over the last few months, governments have been pushed out of office in Ireland,
Greece, Portugal, Spain, Italy, and now (on April 23, 2012) in the Netherlands.
In each case, the standing government was unable to persuade the voters that
it stood for the people rather than being subservient to or in league with
the bureaucrats in Brussels. The uncomprehending "policy makers" (it is significant
that Bernanke loves to refer to himself under that label, rather than as an
economist) have dug their own grave.

I met with Bernard Connolly recently in New York. He believes the fate of
France is now in Germany's hands. As for Southern Europe, the banking systems
will collapse, governments will lose whatever legitimacy they still retain,
with war and bloodshed to follow.

Sheehan serves as an advisor to investment firms and endowments. He is the
former Director of Asset Allocation Services at John Hancock Financial Services
where he set investment policy and asset allocation for institutional pension
plans. For more than a decade, Sheehan wrote the monthly "Market Outlook" and
quarterly "Market Review" for John Hancock clients.

Sheehan earned an MBA from Columbia Business School and a BS from the U.S.
Naval Academy. He is a Chartered Financial Analyst.